Microsoft Should Buy Out Yahoo Pronto: 10 Reasons Why

NEWS ANALYSIS: Microsoft offered to buy Yahoo for $44 billion back in early 2008. But Yahoo, proudly determined to cling to independence, unwisely rejected the offer. Now a humbled and weaker Yahoo wracked by management turmoil could soon be back on the market at a fraction of its earlier value. It’s time for Microsoft to buy out Yahoo and be done with it.

The management and business turmoil surrounding Yahoo has continued unabated for years. The company fired former CEO Carol Bartz, back in September, 2011 and then took months to find a new CEO, Scott Thompson. In just months, Thompson is out as a result of serious personal credibility issues after it was revealed that his resume falsely claimed that he received a computer science degree, even though he didnt.

It was yet another black mark on the once-dominant search engine and Web portal. If Yahoo cant soon find a bonafide turnaround genius to take the helm and work miracles, it may soon find itself drifting rudderless into oblivion.

But there might be another story to tell for Yahoo. Years ago, Microsoft had every intention of acquiring the online company and was willing to pay a major premium on its share price to make the deal happen. After the attempted buyout fell through, Microsoft and Yahoo formed a search deal, which did little to improve Yahoos fortunes. But now, Yahoo likely can be had for cheap compared to the original offer. Furthermore, it appears that Yahoos reorganized Board of Directors will look for ways to maximize shareholder value, which is investor-speak for finding a buyer that will pay a decent price.

One of the nicest things about acquiring Yahoo now is that it can be had on the cheap. In fact, the companys shares are trading today at $15.52far below the $31 Microsoft was willing to hand over years ago when it tried the first time. Considering Microsoft has billions of dollars in cash on hand, it shouldnt have any trouble matching (and even offering a premium on) Yahoos $19 billion market cap.

2. The board wants out of the turmoil

Yahoos board has grown tired of all the turmoil. From the trouble with Jerry Yang to Carol Bartz failing to turn the company around to Third Points Daniel Loeb being a constant headache, the board of directors seems more willing than ever to accept a buyout offer. Loeb, who is now on the Yahoo board, has made it clear that a sale of Yahoo as a whole or in pieces could unlock value to Yahoos shareholders. Why not listen to him?

3. Remember Google

Although some might say that Yahoo is a sinking ship, to Microsoft, itsanopportunitytotakeonGooglefarmoreeffectivelythanithassofar. Yahoo might not be as big as Google and the company has lost its fight with the search giant, but with Microsofts cash and backing, the company might just be able to take the fight to Google.

4. Advertising could be huge

Although Google gets much of the attention in the online-advertising space, Yahoo is also a major player there. Microsoft, thanks to its aQuantive acquisition years ago, also competes well in the online ad market. By joining forces, Yahoo and Microsoft could attract more Website owners, deliver more relevant ads and ultimately, startgainingmoremarketshare.

Don Reisinger is a freelance technology columnist. He started writing about technology for Ziff-Davis' Gearlog.com. Since then, he has written extremely popular columns for CNET.com, Computerworld, InformationWeek, and others. He has appeared numerous times on national television to share his expertise with viewers. You can follow his every move at http://twitter.com/donreisinger.